At least through the end of 2015, an S corporation will not be liable for excise taxes of up to $100 per day per employee due to paying or reimbursing the individual health insurance premiums of employees who are two percent shareholders. This excise tax relief does not apply with respect to employees who are not at least two percent shareholders. IRS Notice 2015-17 can be found here.
Small Employers Have Until June 30, 2015 to Stop Reimbursing Employees’ Individual Insurance Premiums
As a result of the Affordable Care Act, employer reimbursement or payment of employees’ individual health insurance premiums could result in excise taxes of up to $100 per day per employee. Recognizing that small employers have often offered this type of benefit, the IRS issued transition relief from imposition of this excise tax for employers with less than 50 aggregated full-time and full-time equivalent employees. The transition relief applies for 2014 through June 30, 2015. After June 30, 2015, small employers may be liable for the excise tax. IRS Notice 2015-17 can be found here.
Reminder: 162(m) Performance-Based Compensation Plans Must be Re-Approved by Shareholders Every Five Years
As another proxy season gets underway, public corporations should consider whether their performance-based equity or incentive compensation plans should be submitted for shareholder approval at the corporation’s next annual meeting. Generally, Code Section 162(m) requires a plan’s performance goals to be disclosed to and approved by the corporation’s shareholders at least every five years in order for performance-based awards granted under the plan to be exempt from Code Section 162(m)’s deduction limits on executive compensation. Plans that were last submitted for shareholder approval in 2010 should be included in this year’s proxy statement and submitted for re-approval by the corporation’s shareholders.
On January 29, 2015, Anthem, Inc. discovered a cyber-attack that may affect members in all lines of Anthem’s business and the BlueCard program, in which a number of independent Blue Cross and Blue Shield plans participate, such as BlueCross BlueShield of Texas. Anthem’s investigation to date indicates that members’ names, dates of birth, ID numbers, social security numbers, addresses, phone numbers, email addresses, and employment information was accessed. Employers who believe their employees may have been affected should consider alerting them that calls or emails purporting to be from Anthem are scams. Anthem has stated that affected individuals will receive information from Anthem via mail. Employees can also be directed to Anthem’s toll-free hotline (877) 263-7995 and to www.anthemfacts.com for answers to frequently asked questions as well as for information regarding credit monitoring and identity theft protection services provided by Anthem. There have been reports that HHS wants Anthem to handle the… Continue Reading
The Texas Supreme Court has looked to the drilling contract between Transocean and BP to limit BP’s “additional insured” coverage for liability arising out of the Deepwater Horizon disaster. Since the April 2010 explosion and ensuing spill, oil-field developer BP American Production Company and its affiliated companies (“BP”) have sought “additional insured” status under $750 million of primary and excess liability policies issued to the Deepwater Horizon rig owner Transocean Offshore Deepwater Drilling, Inc. and its affiliates (“Transocean”). Transocean and its insurers have argued that BP was only entitled to “additional insured” coverage for above-surface pollution liability since the drilling contract between BP and Transocean required BP to indemnify Transocean for subsurface pollution risk. In March 2013, the Fifth Circuit Court of Appeals ruled that, as long as the indemnity agreement between BP and Transocean and the insurance coverage provision in the drilling contract are “separate and independent,” only the… Continue Reading
The U.S. Department of Labor published a final rule implementing ERISA’s annual funding notice requirement. Generally, administrators of defined benefit plans are required to furnish a funding notice each year to the PBGC, participants, beneficiaries, labor organizations, and participating employers. The funding notice must include the plan’s funding percentage, the plan’s assets and liabilities, a disclosure of events having a material effect on the plan’s assets and liabilities, and a general description of benefits that are eligible to be guaranteed by the PBGC. The final rule includes two model notices and is applicable to notices for plan years beginning on or after January 1, 2015, although plan administrators may rely on the final rule for prior years. Notices must be furnished no later than 120 days after the close of the plan year; different timing requirements apply to small plans. The final rule can be found here.
The Australian government recently released drafts of amendments to the employee share scheme tax rules, proposed to take effect on or after July 1, 2015. The proposals would reverse some of the changes made in 2009 and provide some tax concessions for employees of certain small start-up companies. With respect to reversals of 2009 legislation, changes include permitting the deferral of taxation for share rights if the participant does not own or have voting rights of more than 10 percent of the company (rather than five percent) and permitting the deferral of taxation until the time of exercise of the share right (rather than vesting) or, in certain circumstances, up to 15 years from the date of acquisition of the share right (rather than seven).
Sponsors of Puerto Rico Qualified Plans May Need to File by April 15, 2015 to Secure Tax Qualified Status
Under Puerto Rico Internal Revenue Circular Letter 11-10, any restatement of a Puerto Rico qualified Plan or certain “qualification amendments” must be filed with the Puerto Rico Treasury Department on or before the due date of the employer’s income tax return for the taxable year during which the restatement or qualification amendment became effective. Thus, for a calendar year plan sponsor that restated a Puerto Rico qualified plan or made any qualification amendment effective in 2014 (including amendments required by the U.S. Supreme Court’s decision in U.S. v. Windsor regarding same-sex spouses), such restatement or amendment must be filed with the Puerto Rico Treasury Department on or before April 15, 2015 (or any extended due date to file the employer’s income tax return for 2014).
Resolving a more than 30-year split among the circuit courts, a unanimous Supreme Court rejected the U.S. Sixth Circuit Court of Appeals’ “Yard-Man standard” governing claims for retiree medical benefits arising from a collective bargaining agreement (“CBA”) under which retiree medical benefits are presumed to be vested. In Tackett, the Supreme Court ruled there is no inference that parties to a CBA intend to vest retirees with lifetime medical coverage in the absence of an express contractual provision or other evidence to the contrary, and thus ordinary contact principles should govern interpretation of a CBA. Applying ordinary contract principles, the Supreme Court held that retiree medical benefits established by a CBA with a fixed duration are only guaranteed for the duration of the CBA, absent express language in the CBA or health plan stating otherwise. M&G Polymers USA, LLC v. Tackett, 574 U.S. ____ (2015). A copy of the opinion… Continue Reading
Under old ERISA Section 4062(e), an employer was required to make payments to the Pension Benefit Guaranty Corporation (PBGC) or post a bond when the employer ceased operations at a facility and more than 20 percent of the employees covered by the employer’s pension plan lost their jobs. In mid-2014, PBGC announced a moratorium on enforcement of this provision. Congress recently passed major changes to Section 4062(e), including an exemption for small plans and plans that are 90 percent funded, lowering the trigger threshold from 20 percent to 15 percent, and the ability to make plan contributions to satisfy 4062(e) liability. Due to the additional clarity brought about by these changes, PBGC is ending its moratorium on enforcement. Employers that had or have a cessation of operations on or after December 16, 2014 should use the new rules for determining whether the event must be reported to PBGC. PBGC’s announcement… Continue Reading